Costs and consequences of bribery and corruption

Corruption results in lower service delivery and higher costs

Bribery and corruption continue to occupy a dominant position in our society and our press. This ranges from so-called petty bribes to traffic officials to significant amounts paid as “commissions” for securing tenders. While the amount may differ – whether R100 or R1 million – the nature of the action is not different. It all amounts to bribery and corruption.

It may be a naïve question to ask why this is happening. It is certainly not because those involved don’t know what is right and wrong or, in most cases, because they are in the grip of poverty.

Rather, at the level of the bribe to a traffic official, it can be seen as an avoidance strategy. This could be merely to avoid a fine or, worse, to avoid being jailed for drunken driving. For tenders, there does not appear to be any other motivation than the money.

So, someone avoids a fine and someone else gets rich. Is that really so bad? The costs and consequences of bribery and corruption answer that question best. Accusations of bribery and corruption can negatively impact a company’s share price, as MTN experienced in March this year when Turkcell filed a $4.2 billion suit against them for allegedly bribing officials to win an Iranian licence.

However, as the share price bounced back quite quickly, it could be argued that this doesn’t matter so much. But that argument doesn’t hold when the incident also affects perceptions of the company’s reputation. Reputational damage can last much longer than a mere few days which the share price takes to recover, and it can be very destructive for individuals and organisations.

Individuals found guilty of corruption have in some cases not only lost their jobs, but have also lost their freedom following jail sentences. Jackie Selebi is now the former National Police Commissioner, having been convicted of corruption and jailed for 15 years in December 2011 … Except he’s not a good example because he was released after serving only 229 days of his sentence!

A significant consequence of bribery and corruption is that it adds to the cost of doing business – but, crucially, without adding corresponding value. Instead of the full contract amount going towards the delivery of the product or service, only a portion is productively employed. This can in turn have many consequences such as compromising quality when, for example, inferior building materials are used.

A further cost relates to leadership. When high profile leaders are involved in bribery and corruption, their impact as role models is very damaging. The message is not only that unethical and illegal behaviour is acceptable, but also that the pursuit of personal gain takes precedence over service delivery. This risks creating an unethical culture among employees (or citizens) where such “lowest common denominator” behaviour predominates.

At a national level, this also risks tainting the country’s reputation. A poor ethical reputation brings with it many potential negative results, such as reduced foreign investment, decreased tourism and the loss of our top talent to other countries.

All these costs cumulatively contribute to a legacy cost, and this is a cost which can linger and cast a shadow over an individual or an organisation long after the event. Serious ethical failure such as corruption tends to overtake other achievements and the individual or organisation comes to be known for their ethical failure rather than their success.

These costs and consequences reflect some of the obvious reasons why ethics matters. They also clearly answer the question that bribery and corruption is bad and that the cost is really high – far higher than the country or an organisation should consider affording.